WTI and RBOB prices have drifted higher after modest weakness following API's inventory data overnight and then spiked after DOE reported a smaller than expected crude build, and bigger than expected gasoline and distillate draws. Following the lage rig count data, US crude production rose once again to its highest since Feb 2016.

API

Crude +1.91mm (+2mm exp)

Cushing -576k

Gasoline -1.104mm (-2mm exp)

Distillates -2.035mm

DOE

Crude +867k (+2mm exp)

Cushing -220k (+1mm exp)

Gasoline -3.747mm (-2mm exp)

Distillates -2.483mm (-1.2mm exp)

The trend of gasoline and distillate draws continue and a much smaller than expected build in crude was a surprise...

Cushing's draw holds it just below record highs. While Distillate inventories have come down a long way from the nearly six-year high of 170.75 million barrels we saw in early February, Total Crude Inventories rose to another record high.

Crude stocks rose +0.9 million bbl to 534 million bbl last week, in line with normal seasonal behaviour.

Putting the inventory number in context, Reuters notes that still total commercial inventories are still +54 million bbl higher than at start of year compared with +52 million 2016 and 10-yr avg of +32 million.

Bloomberg's Javier Blas notes that one bearish factor is that U.S. crude imports remain very high, showing no sign of the OPEC production cuts. Over the last four weeks, imports have averaged 8 million barrels a day, roughly the same level. Last week they were at 8.2 million barrels a day, down only 83,000 b/d from the previous week.

Where are the OPEC production cuts? Oil imports from Saudi Arabia remain very strong, running at 1.16 million barrels a day, only down by 119,000 b/d from the previous week. And imports from Iraq were actually UP, running last week at 625,000 barrels a day, up by 74,000 barrels a day. In total, imports came in at 8.2 million b/d last week.

Production continues to trend higher (highest since Feb 2016) with the lagged rig count...

WTI and RBOB prices moved higher from overnight lows following API data, then spiked on the DOE data...

We suspect this momnetum will fade as Bloomberg's Javier Blas notes that Crude stocks build by 0.9 million barrels despite a big increase in refinery intake (+425,000 b/d last week to 16.2 million b/d, ahead of seasonal trends) and a huge jump in crude exports (nearly double from last week to 1.01 million b/d). With domestic processing sharply up and exports also booming, the stock build suggests the U.S. market remains awash with crude.